Wall Street Ends Tumultuous Year Near Record Highs


OPINION: This article contains commentary which may reflect the author's opinion


Friday marked the second year since the global pandemic ended, with Wall Street closing near record highs in light trade.

In the past three years, every major U.S. stock index has reached their biggest three-year advance since 1999, and that includes the Dow Jones Industrial Average, S&P 500 and NASDAQ Composite.

Since the last trading day of 2020, the S&P 500 index has gained 27 percent. To date, it has seen 70 record-high closes, which is the second-highest number in the benchmark index’s history. With Refinitiv data going back to 1928, 1995 was the year in which the S&P 500 closed at the highest level in a single year with 77 record closes.

Over the course of the year, the Dow gained 18.73 percent and the Nasdaq gained 21.4 percent.

Despite tumultuous political and social climates, firms, consumers, and the economy as a whole flourished in 2021 as they navigated their way through a constantly shifting landscape that included the riots at the Capitol on Jan. 6, a tumultuous shift in power. There were several more factors, such as the “meme stock” phenomenon, new variations of COVID-19, a shortage of labor, fiscal and monetary stimulus, hampered supply chains, and a booming demand, which led to price spikes.

“What stands out to us this year among all the negatives, is the resiliency of Corporate America,” said Ryan Detrick, chief market strategist at LPL Financial in Charlotte, North Carolina. “In a sea of uncertainty and higher prices, you have to be extremely impressed by how agile and adaptive Corporate America was to sport 45 percent earnings growth in a very difficult year.”

Despite those results, analysts predicted that S&P 500 companies would deliver earnings growth of 52.8%, 96.3 percent and 42.6 percent, respectively, in the first three quarters of the year, according to Refinitiv, stating that they forecast earnings growth of 22.3 percent for the fourth quarter of this year, which represents an extremely strong growth figure.

As the economy continues to recover and demand surges, the energy, real estate, and microchip industries were some of the best performers in 2021, with growth stocks’ 31 percent gain more than doubling that of value stocks’ 22 percent gain.

As the economy slowly reopened and vaccines were released, marketers’ leaders in the global technology sector and tech-oriented megacap stocks, which had outperformed the broader market in the first year of the global health crisis, fell off the market.

A group of 10 similar stocks, the NYSE FANG+ index, has gained nearly 20 percent so far this year. Alphabet, which owns Google, enjoyed its best year since 2009, posting the biggest annual advance of the NYSE FANG+ components.

Dow Transports, often regarded as a barometer of economic health, registered a gain of more than 31 percent for the year.

Treasury yields have been steadily rising over the past few months, coupled with recent pronouncements from the Federal Reserve, which now sees as many as three rate hikes in the next several months, and these factors helped support interest-rate-sensitive financial stocks, which gained about 33 percent.

Travel-related stocks continue to be pressured by the COVID-19 pandemic, which erupted in 2020 and had the steepest and fastest economic contraction in history.

One of the few sectors that lost money in 2021 was the S&P 1500 Airlines index, with an annual decline of nearly 2 percent.

However early evidence suggests the Omicron variant of COVID-19, which has caused a spike in infections around the globe, may be less virulent than its predecessors, and the economy is showing signs of normalizing several years after the first notices of COVID-19 were reported.

There were losses of 59.78 points, or 0.16 percent, in the Dow Jones Industrial Average to 36,338.3, 12.55 points, or 0.26 percent, in the S&P 500 to 4,766.18 and 96.59 points, or 0.61 percent, in the Nasdaq Composite to 15,644.97.

A total of 7.6 billion shares were traded on U.S. exchanges, well below the average daily volume of 10.55 billion shares for the past 20 trading days.

In Friday’s session, consumer staples were the sector that saw the largest gain out of the 11 major sectors within the S&P 500 index, while communications services experienced the largest percentage drop.

At the New York Stock Exchange, advancing issues outnumbered declining ones by a ratio of 1.39-to-1; on the Nasdaq, decliners took the lead by a ratio of 1.18-to-1.

As for the Nasdaq Composite, it recorded 58 new highs and 143 new lows, whereas the S&P 500 posted 47 new 52-week highs.

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